I was thinking about what a country that enters a recession and is prescribed the usual Keynesian remedies, and whether there were identifying features that all countries shared that follow this approach. My belief is that we’d see a country come out of this recession with a much higher governement debt, higher inflation, and bigger government sector, price/wage controls, which stands in contrast of what I’d expect if a country’s recovery was shaped by free market forces.
More importantly, do these Keynesian countries exhibit a pattern whereby each recovery takes longer than the last and they come out with more debts, higher inflation, a bigger government sector, and increasing price/wage controls until the recession is a Great Depression type event where nothing in the Keynes playbook works and default/liquidation is inevitable?
Is that what Ishould expect to find if I examined the boom bust cycles of some Socialist countries or am I off base here?
I’m not an expert on this but what you’re describing is obviously very similar to what we’re seeing now (and have been seeing for the last 80 years or so and not just in the US.) Therefore, all things being equal, it seems fair to assume that your observation/prognostication fairly describes the long term consequences of the use of Keynesian tools.
Btw, I don’t think we’ll ever get to a point where the Keynesian tools won’t work, they’ll just be incredibly expensive to use. As you point out, the consequences of using them are cumulative. They start out costly and just get more costly over time the more they’re used.
I’m going to do a little research and see if my assumptions have some merit than ask Krugman or a Keynsian why it would be that Keynsian methods leave a country in progressively worse economic health after each recession. Krugman still argues that his advice would have worked on Japan if only the government spent just a little bit more. They practically bankrupted themselves with those Keynsian cures and are about to go at it again for nothing.
Every Keynesian says that about every case in history and will say it about every future case. Any amount of spending will always be less than what should have been done. It’s essentially the Keynesian version of the “true communism” immunization strategy.